At the highest and lowest ticks of a move under way, the conditional probabilities that you've actually detected the ultimate price high or low are relatively low. As you see flows unfold and result in diminished upside or downside, those probabilities begin to rise. At some point, the probabilities that a high or low have already been made become sufficiently great that a trade short or long is warranted. Although I'm not a trader of chart patterns, I find it useful to think about moves as having a left shoulder (a momentum peak), a head (a price high or low), and a right shoulder (a failed bounce or dip). The high probability trade lies in fading that right shoulder and participating in the move that results when buyers or sellers have to exit their positions.

In factor terms, you're a value buyer/seller (fading price extremes) profiting from momentum in the other direction.